European Pallet Market Faces Challenges, Undergoes Changes
The world’s largest pool of exchangeable pallets faces a number of challenges including more intense competition and a split with the European railway authorities. How could these changes impact the EPAL Euro pallet, world’s most dominant pallet standard?
By Chaille Brindley
Date Posted: 6/1/2013
For years, Europe has been home to the largest pool of exchangeable, standardized pallets in the world. Its European Pallet Association (EPAL) certified pool of Euro pallets has become the envy of the world with more than 450 million standardized pallets in the market. But not all has been smooth sailing for the EPAL over the last year.
CHEP Unveils Life Cycle Analysis
CHEP Europe has come out with research indicating its pool of private rental pallets is better for the environment. EPAL and the railway authorities are splitting ways after years of success. And an upstart competitor in the WORLD pallet has plans to launch in the United States and wants to learn from EPAL’s mistakes in North America. How will these developments impact the extension of the EPAL system around the world as well as Europe?
Is Blue Greener than White?
CHEP Europe, which operates a private pool of rental pallets across Europe, touted an independent assessment that found CHEP’s pooling system has the lightest impact on the environment when compared with alternative pallet systems, namely white-wood returnable pallets and white-wood disposable pallets. CHEP commissioned a comprehensive life cycle assessment study that was conducted in accordance with ISO 14044 certification methodology. CHEP also used a peer review process of independent experts to evaluate its research.
CHEP’s global director of sustainability, Dr Juan José Freijo, said, “We found that emissions and resource consumption when using CHEP’s pallet pooling system are less than half than when using white-wood returnable pallets, and the waste generated is about 18 times lower than white-wood disposable pallets.”
CHEP uses the study to help customers assess the total environmental footprint of packaging, transportation and delivery of their goods on a pallet in the European supply chain. The life-cycle assessment study focused on CHEP Europe’s three key products: the Euro pallet (1200x800mm), UK pallet (1000x1200mm) and half pallet (600x800mm). The research firm evaluated the total environmental impact of the pallets over their entire life cycle from harvesting trees to end-of-life recycling.
According to CHEP, the study results demonstrated that the CHEP pooling solution generates the lowest environmental impact among the analyzed wooden pallet systems. The primary drivers in the results were CHEP’s intrinsic business including use of certified wood, higher transport efficiency, lower losses and recycling at the end of life.
Pallet Enterprise was unable to evaluate any of CHEP’s claims because our staff did not receive a copy of the summary data or the peer review report before we had to go to press.
CHEP has used information from its life cycle analysis to develop the first carbon neutral pallet program in the world. CHEP and Unilever launched the program last year in Spain. Unilever was able to offset the annual carbon footprint of its CHEP pallet movements in Spain by calculating the impact based on CHEP’s life cycle analysis combined with purchasing carbon credits. It remains to be seen if carbon neutral campaigns will catch on with other pallet users. But CHEP’s data collection and analysis of its environmental impact helps position the pallet pooler to better compete and substantiate its green credentials.
Railway Authorities and EPAL at Odds in Europe
The European Pallet Association (EPAL) and the International Union of Railways (UIC) have split ways over what appears to be a squabble about the certification organization that will oversee quality control for the EPAL Euro pallet pool.
EPAL selected Bureau Veritas Industry Services after a lengthy process that included the incumbent service provider. Bureau Veritas took over this responsibility as of January 2013. By the end of the first quarter of 2013 EPAL had already recorded the production of over fifteen million Euro pallets under the quality controlling of the new partner for independent quality assurance.
EPAL stated it made the change to Bureau Veritas because the “former audit company was not one of the best three proposals from a financial or qualitative perspective.” While it is not clear if UIC Working Group for Palletization took action only in response to the ouster of Societe Generale de Surveillance (SGS), it does appear that the rail authorities preferred the former vendor stay in place. Regardless, the UIC Working Group decided in October 2012 to redefine the conditions for the approval of new pallet organizations and subsequently named two other organization to be approved for developing future pools; this includes SGS and a European pallet dealer. In December 2012, the UIC Working Group decided to withdraw its designation of EPAL as an authorized pallet organization as of January 1, 2013.
The UIC rejected opportunities to negotiate with EPAL even though the pallet organization has been successfully talking with a number of UIC member railways including DB Intermodal Services and SBB Cargo. Not all the railways were involved in the UIC Working Group. The UIC had licensed the EUR/oval pallet mark to EPAL and other organizations. Until the recent breakup, EPAL had been the largest EUR-marked and UIC approved pallet pool in the world.
This is a clear Catch-22 situation because both the UIC and EPAL need each other. The endorsement of the UIC is partially responsible for helping EPAL make such strong inroads into the European rail market. At the same time, EPAL has developed a monstrous pool of around 450 million certified EPAL pallets with 1,500 licensed member operators around the globe. It would take more than a decade and billions of dollars to equal such a pool.
In 2012 approximately 67 million EPAL Euro pallets were produced under the license and quality assurance terms of EPAL. Many pallet users in countries, such as Italy, have moved to using only EPAL certified pallets because other Euro pallets are considered far inferior in quality. Customers want to know that they are buying a quality pallet, and it takes a strong inspection program to ensure that standards are maintained.
Without coming to some sort of agreement, some pallet users might be forced to separate EPAL and whatever new brands the UIC endorses. This could cause lots of extra work and confusion in the marketplace. It also could create the opportunity for CHEP, LPR or other private rental companies to grab market share in Europe. And the UIC wants a free open pool that adheres to a true quality standard. It already has it with EPAL if the current disagreements can be worked out.
It is highly unlikely that either SGS, even with its billions in revenue, or the private pallet dealer endorsed by the UIC Working Group would want to fund such a sizeable venture.
The UIC Working Group claims it wants to develop a “One Brand Strategy” where pallet organizations and license holders cooperating with it in the future utilize labeling with the letters UIC instead of the EPAL/oval mark. This is an attempt to exert control over any future pallet organizations.
EPAL voted on April 16, 2013 to cease all cooperation with the UIC for the foreseeable future. It marches on and will organize the open Euro pallet exchange pool independently from the UIC. But EPAL seems open to work with individual railways as well as the UIC if negotiations resume.
EPAL stated, “The UIC Working Group’s decision is irrelevant to the further activities of EPAL in its organization of the free EPAL Euro pallet pool, and in particular with respect to the suitability for exchange of the EPAL Euro pallets and EPAL-box pallets produced in the past and indeed in the future under the EPAL license.”
EPAL suggested that exchange of EPAL/oval and EUR/oval marks without restriction should continue. As far as EPAL being able to use the EUR/oval mark on its pallets, the organization recently decided to replace the EUR/oval mark on the right corner block of the pallet with the EPAL/oval mark. It has also decided to remove from the center block the mark of the respective national railway.
With so much at stake, it appears the right thing to do is for the UIC Working Group and EPAL to come to some arrangement or the results could be harmful for both organizations.
WORLD Pallet Plans U.S. Market Launch
A competitor to the popular EPAL Europallet in Europe, WORLD Pallet AG, is looking to build its network in the United States and hopes to launch in this country by the end of 2013/early 2014. “European customers that have used the WORLD Pallet have expressed interest in using this trusted brand in the United States,” said Marcus Falkenhahn, chief executive officer of World Pallet AG. “We are looking for large pallet manufacturers in the United States that could be partners for our expansion efforts.”
Falkenhahn added that the WORLD pallet has grown in popularity since it was first introduced in 2008. It now serves 500 customers with millions of pallets. Currently, the World Pallet in Europe is a 800x1200 mm size pallet, but Falkenhahn said that his organization would work with U.S. partners and use local standards, sizes and dimensions to produce 48x40 block and stringer styles for the U.S. market.
Contrasting his organization with the approach used by EPAL when it looked to make inroads in the United States, Falkenhahn said that the WORLD Pallet is open to work with local standards, defer franchise fees and would not require strict quality inspections. Unlike the EPAL pallet, there would not be specific nail or lumber requirements that would be difficult for U.S. producers to supply.
Falkenhahn said, “We would create a whole new WORLD standard for the U.S. market.”
Quality hasn’t been a problem for the development of the European WORLD Pallet pool because all of the supply has been produced by Falkenhahn AG, a large manufacturer of pallets in Germany. Its highly automated manufacturing facility can produce up to 10 million pallets per year. The entire process uses automation and robotics to manufacture up to 50,000 per day using only three people in one shift, according to Falkenhahn. He added that the entire facility runs without a person having to touch a single board.
While partners in the United States would not have to be as advanced as the Falkenhahn facility, the organization behind the WORLD Pallet is looking for quality producers with automated nailing capacity to join its initial network in the United States.
Recently, the WORLD Pallet added RFID capacity to its offerings although Falkenhahn was quick to point out that most customers are not willing to pay for it at this time.
The WORLD Pallet began when Falkenhahn AG decided to stop working to produce EPAL pallets due to concerns about the royalty fee. Since Falkenhahn AG produced about 50% of the German market at the time, Falkenhahn asked, “Why should we continue to work for EPAL?” He launched the WORLD Pallet program in 2008 and is the exclusive licensee in Europe.
Shortly after the new standard was launched, EPAL sued WORLD Pallet in Germany to stop alleged mark infringement. EPAL claimed that the WORLD mark depicted in an oval was too similar to its own quality mark, which was causing market confusion and the impression that the pallets were interchangeable. Although the German courts initially sided with EPAL, the court did not require that the existing WORLD pallets be destroyed or remarked. Eventually the German courts deemed that the WORLD mark could be used. Falkenhahn claimed, “We are 100% legal in terms of the trademark issue.”
U.S. companies that want to use the WORLD logo would need to be licensed by WORLD Pallet AG. Falkenhahn stated, “There is the possibility of contracting exclusive rights for specific regions in the American and Asian markets.” He also said that his organization is open to producing either block or stringer styles pallets in the United States.
For more information on the WORLD Pallet, visit www.world-pallet.com or email firstname.lastname@example.org.
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